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    Published on: October 15, 2015

    This commentary is available as both text and video; enjoy both or either ... they are similar, but not exactly the same. To see past FaceTime commentaries, go to the MNB Channel on YouTube.

    Hi, Kevin Coupe here, and this is FaceTime with the Content Guy, coming to you this morning from Freeport, Maine, where I came to do a talk for the Maine Grocers and Food Producers Association.

    I'm not a big shopper, but I do like Freeport ... maybe that's because LL Bean is my idea of a fashion designer. LL Bean also is my idea of a nimble, progressive retailing company - the way in which it has evolved from a catalog company to one that embraced the Internet, to one that is now judiciously opening bricks-and-mortar stores around the country, even in new markets like the Pacific Northwest ... well, this is a 21st century company that is embracing all challenges and opportunities inherent in the conduct of commerce today.

    But that's not what I want to talk about this morning. I want to talk about boots. Duck boots, to be specific.

    Now, I'm not a personal fan of the Bean duck boots. But I know a retailing success when I see one. LL Bean has been making these things for more than 100 years, and these days - for reasons of fashion that are way beyond my ability to comprehend - they are more successful than ever. Last year, they sold 450,000 of them, and were backordered almost all winter. This year, they expect to sell 500,000 - and my understanding is that if you order a pair right now, you'll probably get them sometime in February ... despite the fact that LL Bean hired dozens of people to manufacture them.

    The thing is, the boots are made in the USA. Always have been. And while Bean could've outsourced the manufacture of the boots to China or Thailand or Mexico or some such place, the company decided not to, out of a conviction, I'm sure, that doing so would damage its essential value proposition. They'd rather the boots be right and local, and are convinced that customers would rather wait for them than get a pair of lesser value.

    Giving up short-term sales and making customers wait is probably not the easiest decision in the world for a retailer to make, but I think it is the right decision. Nurturing and protecting the brand always is.

    That's what is on my mind this Thursday morning. As always, I want to hear what is on your mind.

    KC's View:

    Published on: October 15, 2015

    by Kevin Coupe

    Bloomberg reports that Starbucks, which has been looking to differentiate its ordering process by doing things like rolling out its mobile ordering application nationally and even experimenting with a "Green Apron" delivery service in New York City, now is "adding video screens to the drive-thru lanes of 2,400 cafes in the U.S., an attempt to revamp a decades-old ordering system that has become central to how restaurant chains interact with customers."

    The screens, having been tested successfully in Seattle, will be added during the coming year and will "show drivers the barista’s face, along with items ordered and the cost ... The drive-thru isn’t as crucial to Starbucks as it is to fast-food chains like McDonald’s Corp., which get about two-thirds of sales that way. But the coffee giant wants to give drivers something closer to the in-store experience, which Chief Executive Officer Howard Schultz has said is a reason for the company’s growth."

    "It’s about that customer-barista connection," said Haley Drage, a Starbucks spokeswoman.

    That's a really important factor in every retail business, but I think it is one that many retailers tend to minimize. How many supermarket operators, for example, would argue that employees at checkout do little if anything to improve the shopping experience? (Lots of them. They've told me so.)

    This stuff doesn't happen all by itself. To create an engaging in-store experience, you have to invest in the front line employees, so they feel invested in the company. That clearly seems to be what Starbucks is doing ... and it is, or at least ought to be, an Eye-Opener.
    KC's View:

    Published on: October 15, 2015

    Walmart said yesterday that it is expanding its e-grocery, click-and-collect service to ten new US markets - Dallas, Houston and San Antonio in Texas; Miami, Tampa, Orlando, Naples, and Cape Coral in Florida; and Oklahoma City and Tulsa in Oklahoma.

    This is seen as a significant expansion of service that previously was available in San Jose, California; Bentonville, Arkansas; Phoenix, Arizona; Denver, Colorado; Huntsville, Alabama; Atlanta, Georgia; Charlotte and Fayetteville, N.C.; Salt Lake City and Ogden, Utah; Nashville, Tennessee; Tucson, Arizona; and Colorado Springs, Colorado.

    The announcement comes as Walmart CEO Doug McMillon said that the company expects to invest as much as $2 billion in e-commerce initiatives over the next two years. That, along with the company's plan to invest $2.7 billion dollars in higher employee wages over the next two years, contributed to an announcement that the company expects flat or declining profits for the next three years, which led to an almost 10 percent drop in its share price.

    McMillon urged investors yesterday to be patient, saying that Walmart remains a growth company and that the company needs to do these things in order to position itself for long-term success.

    In its coverage of the e-commerce investment, writes that "with the quickening pace of the rollout to new markets, it’s clear that – for now, at least – Walmart is betting on curbside pickup instead of delivery. Meanwhile, its competitor Amazon is testing grocery deliveries with its AmazonFresh service, and, to some extent, it’s also offering grocery delivery via Prime Now. In addition, grocery delivery is becoming a popular service in a number of regions nationwide, thanks to similar expansion efforts by delivery services like Instacart, Peapod, and Shipt, for example.

    "However, Walmart’s pilot testing clearly led the retailer to believe that curbside pickup is the best – and most profitable – way to differentiate itself from the competition. It’s also one that takes best advantage of the infrastructure Walmart already has in place, including stores that are within 5 miles of 70 percent of the U.S. population."

    The Street reports that McMillon said yesterday that the company is open to 'dramatic action" to address its stock price and profit issues, including the possibility of existing non-strategic markets. Selling off the company's Brazil business seems to be an option.

    There's also the possibility that Walmart could spin off its Sam's Club business to fund other investments.

    The Street also took note of some positive investor news from Walmart yesterday - "a new $20 billion share repurchase plan, likely to help offset pressured profits by reducing the number of shares outstanding."

    "These are exciting times in retail given the pace and magnitude of change. We have strengths and assets to build on and are making progress to position the company for the future,” McMillon said in a prepared statement. "We’re encouraged by recent customer feedback and will continue to get stronger. Our investments in our people, our stores and our digital capabilities and e-commerce business are the right ones. We will be the first to build a seamless customer experience at scale to save our customers not only money but also time."

    The Wall Street Journal writes that these efforts, "while costly, are likely necessary for Wal-Mart, which was losing customers due to poor conditions at many of its stores while seeing sales drawn away by and other online retailers."

    Quartz writes that Walmart essentially "is asking investors to change the way they think about Walmart. Instead of turning to the company for a steady source of cash and dividends, the company now wants investors to bet on it like a smaller, more nimble growth company (despite the fact it brings in half a trillion dollars in yearly sales)."

    And Fortune says that "the investments are critical to a strategy that seems paradoxical for a retailer that is largely associated with lower-income shoppers: Wal-Mart is going up market with some of its assortment and store presentation in a bid to win more business from the middle and upper middle class.
    KC's View:
    Tough day at Walmart, with a lot of piling on by some in the investment class about the situation in which the company finds itself.

    But let me suggest that yesterday could end up being one of the most important days in the company's history ... the day that leadership bit the bullet and set the tone for long-term growth. By essentially lowering expectations for three years, Walmart may have given itself some breathing room to do the things that need to get done.

    I believe that Walmart has to invest in e-commerce if it is going to compete with Amazon. I think it has to invest in its employees if it is going to improve the store experience. And I think that the company's willingness to make these moves ought to concern a lot of other retailers, because three years from now, Walmart could be a much stronger company, and much more formidable competitor.

    Published on: October 15, 2015

    Marketing Daily reports that a new AT Kearney study says that "more than one-third of primary grocery shoppers bought food online last year, with e-commerce sales growing at five to six times faster than in-store growth.

    "And while much of the gains are coming from predictable segments, including Gen Y, urbanites and those earning $75,000 or more per year, the study found solid gains in every segment. One-quarter of those 65 and older have purchased groceries online, and 32% of those between 55 and 64."

    The story goes on to say that cost remains "a concern, with 58% of respondents saying they would shop more if costs were comparable to what they pay in stores, and 58% say they would do so if shipping or pickup was either low-cost or free. But they are happy to pony up for convenience, with 80% willing to pay more for home delivery."

    AT Kearney says it "expects online grocery sales to grow between 15 and 18% a year for the next 10 years, when it will command up to 16% of the total grocery market."
    KC's View:
    If Walmart didn't see this study before it announced the $2 billion investment in digital and e-commerce, at the very least it should have reinforced the wisdom of its decision.

    Published on: October 15, 2015

    Bloomberg reports that Albertsons has decided to postpone the initial public offering (IPO) that was scheduled for today, "citing recent market volatility."

    Specifically, the story says, that "volatility" refers to "a weak profit forecast from Wal-Mart Stores Inc. sent that company’s shares on their biggest decline in more than 27 years." Albertsons reportedly decided "to wait at least a day to reassure investors."

    Albertsons was hoping that the IPO would raise as much as $1.7 billion. CNBC reports this morning that "despite an intended price range in the mid-$20s, some of the larger institutional investors who were bidding for shares of the IPO had gravitated toward a $17 price point -- a level far lower than what the grocery chain's sponsors had in mind. As of Wednesday night, there was no guarantee of specific timing, but Albertsons did plan to 'take a swing' at pricing its deal the following afternoon, said someone familiar with the matter.

    "If the Albertsons IPO were to be priced on Thursday evening, this person said, a share price of $18 might be the best underwriters could expect."
    KC's View:

    Published on: October 15, 2015

    Fortune reports this morning that if Whole Foods is successful, "it may soon be just recognized as a trailblazer in tech," and is announcing "a partnership with business enterprise software company Infor to build out a cloud-based platform for Whole Foods to help with its merchandising and supply chain. It’s the latest move by Whole Foods to use technology as a differentiator as it faces growing competition in the natural and organic categories from chains as varied as Costco, Trader Joe’s, and Sprouts."

    The story says that the new partnership will "have the potential to capture hundreds, if not thousands, of attributes on every product—everything from a unit measure and weight to the metrics used in the company’s responsibly grown program, such as water usage." Co-CEO Walter Robb tells Fortune that "the system feeds into major shifts toward accountability, traceability, and responsibility ... When it comes to traceability for consumers, the new platform could mean identifying something as specific as when your vegetables were harvested. Whole Foods will also be able to send information back to suppliers on how products are selling and give them insight into trends."

    Fortune notes that because Whole Foods is a company that has grown through acquisition and has a decentralized management structure, it "has a particularly fragmented technology infrastructure and is still doing manually what other retailers already have automated." This new partnership is designed to address that.
    KC's View:
    Traceability. Trackability. Transparency. I've felt for a long time that these three things are absolutely key to doing business as a food retailer or manufacturer in 2015 and beyond ... and it sounds like Whole Foods understand this. If you use technology to maintain and accumulate this information, it actually provides the high level of authenticity that also helps to drive success.

    Published on: October 15, 2015

    The Food Marketing Institute (FMI) yesterday announced that it is rolling out a new campaign, linked to a new website that it says is "aimed at correcting misconceptions in the food retail environment," and is "designed to help food retailers mitigate untruths that ultimately confuse shoppers or get perpetuated online."

    FMI says that "the site,, hosts initial myths that FMI experts across practice areas will continue to update based on visitor feedback. The list will grow as questions are aggregated through the website and funneled through FMI practice areas to receive a fact-based response. As each new myth is addressed in October, FMI will leverage the hashtag, #SupermarketMyths, engaging social media followers about the truth in food retailing."

    On the website, FMI says that "as the voice of food retail, Food Marketing Institute offers a complete picture regarding the health, safety and merchandising practices of grocery stores. Unfortunately, sometimes FMI’s role requires refuting false claims we read in media outlets that are perpetuated via the Internet."
    KC's View:
    At the risk of offending my friends at FMI...I'm not sure that consumers will find the initial effort to be entirely credible.

    For example, one of the "myths" that the site seeks to disprove is that "grocery stores subtly manipulate consumers into spending more." The argument is that "success in food retail relies upon customer loyalty, which is cultivated through proving trustworthy, providing quality goods and offering helpful service.  Shopping carts, store layout and sales deals are designed to make the shopping experience more positive and convenient. Food retailers want to satisfy customers because happy customers will be return customers. 

    Food retailers have always been in the business of selling by volume. Substantiating the reliability and consistency of their business model, food retailers have earned a net profit of  about one percent, or a penny-on-the-dollar, for the last two decades ... Grocery stores often call attention to cost-saving measures, which include coupon notification, employing social media tactics and giveaways, fuel reward programs, sales promotions and offering private brands."

    I think this is what's called a non sequitur. It is absolutely true that retailers want customers to be happy, because happy customers are loyal customers. And it is absolutely true that retailers employ tactics that draw attention to price-cutting and cost-saving programs as a way of generating consumer and traffic and sale. But to suggest that grocery stores don't create formats and layouts and departments that are designed to get people to buy more products and spend more money ... well, that doesn't seem like the strongest argument in the world.

    (Note: Pretty much every checkout lane in the country is designed to prompt impulse purchases, which is the very definition of manipulating customers into buying more.)

    Other "myths" that FMI wants to dispel include that "grocery carts are germy," and that "sometimes fresh foods at the grocery store aren't fresh." While I think it is entirely fair to argue that many supermarkets do their best to clean their shopping carts and make sure that their fresh foods actually are as fresh as possible, defining these as "myths" strains credulity. The thing is, there are a lot of shopping carts out there that are germy, and we've all seen fresh food departments that have seen better days.

    I'm not picking on FMI or food retailers here. Really, I'm not. I just think that in the well-intentioned desire to present the best face of the food retailing business to the public, especially in the face of aggressive and encroaching competition, you have to be careful not to make assertions that are demonstrably overstated. That makes you almost more vulnerable than not saying anything.

    Make the points you need to make - that when retailers sell more stuff it is because they are more in synch with what consumers want ... that retailers do their best to keep shopping carts clean and fresh food fresh ... but don't set yourself up with statements that can be easily challenged.

    Now, I'm a member of the media, and MNB is a media outlet. If someone wants to tell me that when I make these points, I'm making false claims, go right ahead. Take your best shot. But I'll bet I can find store layouts designed to manipulate people into buying more stuff, germy shopping carts and not-so-fresh fresh food at a supermarket in virtually every major and minor market in this country.

    Published on: October 15, 2015

    • Nielsen is out with a new global survey that it says shows that "consumers are increasingly willing to pay more for socially responsible products. In fact, 66% of respondents say they’re willing to pay more for products and services that come from companies who are committed to positive social and environmental impact, up from 55% in 2014 and 50% in 2013."

    Two other conclusions that caught MNB's attention - the assertion that "consumers in Latin America, Asia, the Middle East and Africa are 23%-29% more willing to pay a premium for sustainable offerings than developed countries," and that "almost three out-of-four Millennial respondents are willing to pay more for sustainable offerings, up from approximately half in 2014."

    Reuters reports that the Brookshire Grocery Co. is exploring a possible sale of the company, which operates more than 150 stores in Texas, Louisiana and Arkansas. Such a sale could be worth as much as $1 billion, and among the companies said to be interested is Albertsons.

    • The Cleveland Plain Dealer reports on how "two years after its catastrophic data breach, Target has become the first major credit card issuer to convert to cards that contain a PIN.

    "The department store -- which also issues a Visa credit card that consumers can use anywhere that accepts credit cards -- began notifying credit card customers this week that new cards are coming. The new cards will be MasterCards and will contain computer chips as well as PINs."

    • The San Jose Mercury News reports that Danny Meyer's Union Square Hospitality Group, which owns restaurants in New York city and other metropolitan areas, has decided to ban tipping of its wait staff. The move takes effect in some restaurants next month, and will be company-wide within a year.

    The company said that it is eliminating tipping and raising prices as a way of creating a more equitable wage system throughout its restaurants.

    "We believe hospitality is a team sport, and that it takes an entire team to provide you with the experiences you have come to expect from us," Meyer said. "Unfortunately, many of our colleagues -- our cooks, reservationists, and dishwashers to name a few -- aren't able to share in our guests' generosity, even though their contributions are just as vital to the outcome of your experience at one of our restaurants."
    KC's View:

    Published on: October 15, 2015

    Retail Week reports that Chinese e-commerce giant Alibaba has hired Amee Chande, the former managing director of Tesco’s Nutri Centre health business in the UK, to be its new UK managing director. The story notes that "she joins Alibaba as it seeks to increase its presence in the UK and encourage more British retailers to launch in China through platforms such as Tmall."
    KC's View:

    Published on: October 15, 2015

    We reported yesterday about how Starbucks is testing a "Green Apron" delivery service in the Empire State Building, which led MNB reader Kelly Soos-Fell to write:

    I read your Starbucks piece as I was drinking my Grande Skinny Vanilla Latte which I purchased by going through the drive through and using my mobile app to pay.  This location only being 2 minutes from work, I found myself asking, “How much would I actually pay for Starbucks to deliver this to me?”  Would there be a delivery fee added?  My drink this morning cost $4.59.  Sticking to drive thru would be more economically responsible (but when is paying $4.59 for a cup of coffee economically responsible, right?)  $5.00?  $6.00?  How much before I would say, “Nah, it’s not worth it.”  For Starbucks lovers like me, it makes me think.  (I don’t know the answer to that question by the way.) But the next time I’m craving a coffee or tea in the middle of the afternoon, I will be sure to ask myself, “If Starbucks delivered it to me, how much would I pay?”  I’ll keep you posted...

    Please do. I'm totally with you on this.

    I criticized Tesco the other day for creating a price matching program in the UK that did not include discounters Aldi and Lidl, which I thought ignored the two companies that have been having the most impact on its sales. Which prompted MNB reader Pete Deeb to write:

    If the fastest way to the bottom is to get into a price war then Tesco NOT matching Aldi & Lidl is strategically a move that they have probably considered very carefully. Full service supermarkets should be competitive with the other retailers in their trading area , however, there are many ways to be competitive and attractive to customers other than price.

    Matching limited assortment retailers with odd pack sizes targeted at the shopper who is mainly price oriented is a roadmap to undermining your business model and will lead to decreased profitability. Store Brands are an essential part of that model and properly pricing and more importantly marketing them(which many retailers do a poor job of) can offset a limited assortments discount pricing.

    Maybe. But I also think it is possible that Tesco does not want to pick a fight that it cannot win. Which is fine, except that consumers get a vote.

    Regarding my criticisms of the Anheuser-Busch InBev move to acquire ABMiller, as well as suggestions that it is making distributor deals designed to make it harder for small brewers to get traction, one MNB user wrote:

    To me they should allow this deal but block the smaller deals, where A-B is buying up small breweries.  That is really where they stifle the competition.  By stopping the evolution of new styles and tastes within beer, they limit the market.  Buying SABMiller just combines two plain lager brewers.  Keep them from buying up the breweries that have brought back dead styles like gose or chose to infuse their beers with a variety of new hops or herbs.

    From another reader:

    Kevin, I think your “gut” is correct about this deal.  I can see no benefit of these two merging accept to AB.  This would form a behemoth the likes not seen in the CPG world.  I would compare it to Wal-mart and Kroger merging or closer to the package goods industry, P&G and Kraft.   Like you, I would be surprised is this passes FTC muster.

    Finally, responding to my comments about the baseball playoffs, one MNB user wrote:

    Cut my veins
    Slice ‘em in two
    And all I’ll bleed
    Is Dodger Blue.

    Fine. You may have something to celebrate tonight. Or I may. We'll see. problem is not with the Dodgers. My problem is with Chase Utley.

    From another reader:

    In my opinion I think a lot more people in your reader base are cheering for the Cubs than the Mets. The main fact Chicago has not won a series since 1908 and 1907 respectively. If there is a city in the US that could use a World Series Championship with all of the issues Chicagoan’s have had to deal over the last few years it’s the Windy City. I will end by saying wouldn’t it be wild if “Back To The Future II” was correct in predicting the Cubbies winning the series in 2015?! GO CUBS!

    If the Mets are eliminated at any point, I'll be happy to cheer for the Cubs in the post-season.

    I do think that if the Cubs win the World Series, Theo Epstein will be the sports executive of the century ... he'll never have to buy a drink or a meal in Chicago or Boston for the rest of his life.

    But I hope it doesn't happen this year.

    Let's go, Mets!
    KC's View:

    Published on: October 15, 2015

    The two American League Divisional Series ended last night with two game fives ... and it didn't go well for Texas.

    The Toronto Blue Jays defeated the Texas Rangers 6-3 and the Kansas City Royals defeated the Houston Astros 7-2 ... pitting the Blue Jays against the Royals in the AL Championship Series that begins on Friday.
    KC's View: